Deal agreed
August 25, 2011
Spanish soccer fans are breathing a sigh of relief after players in the first and second division agreed to end their strike over pay. After the latest round of talks, the players' union AFE and the Spanish soccer league LFP agreed that the league would guarantee the 50 million euros ($72.1 million) owed to the players - an idea the LFP had previously rejected.
The two sides also agreed that players could be released from their contracts if wages are not paid. The deal paves the way for the start of the Spanish season this Sunday. The first round of matches had to be canceled because of the strike action.
But while Spanish clubs as well as the national team seemingly have a stranglehold on top honors - Spain are World as well as European champions, Barcelona won the Champions League and the world's top three footballers, Lionel Messi, Andres Iniesta and Xavi, all play in Spain - they are grappling with a major financial crisis.
Amidst all the glory, accounting seems to have fallen by the wayside in Spanish clubs. As a result, a rather large, debt-laden, bubble has steadily built up and is about to burst.
In total, Spanish clubs owe the princely sum of five billion euros ($7.2 billion). This year alone, 733 million euros will be added to that bill - eye watering sums of money that have slowly been eating away at clubs' bottom lines.
No gas in the tank
"Some players have had to sell their cars to make ends meet, some don't even have enough money to buy petrol" said David Aganzo, a striker for Rayo Vallecano, a club that went into administration. Markus Rosenberg, the Swedish striker who went on loan from Werder Bremen to Racing Santander last season, tells a similar story.
"They owe me more than half my income," he told German public broadcaster ZDF. "It was a problem for the whole team, for the entire league," he said.
Former Bundesliga midfielder Gerhard Poschner knows this problem all too well. He managed Real Zaragoza's business affairs for just under a year before he quit, because he could no longer deal with the club's attitude to doing business.
It's the fifth time Spain's soccer players have gone on strike. The first time, in 1979, was all about better social security, but after that, it was usually about the club's questionable attitude towards payment.
Go into debt now, pay back half later
Spanish clubs usually buy in expensive players and pay them huge wages, which are far in excess of their takings from sponsors, TV rights and transfer fees. That works fine for a while, until the debt molehill turns into a mountain and the club files for insolvency.
In Germany's Bundesliga, that would spell compulsory relegation, but Spanish clubs have the option of paying 50 percent of their debt to avoid being relegated. In other words, clubs rack up debt, only have to pay back half of it and are free to carry on regardless. A total of 21 clubs teetering on the brink of collapse in the top two divisions have taken advantage of that option in the last few years.
And the lax insolvency laws for Spanish clubs are not the only thorn in their European rivals' sides. Bayern Munich and Manchester United sued 31-times Spanish champions Real Madrid for allegedly receiving illegal state aid.
Real made a tidy sum - 480 million euros to be precise - from selling one of its training grounds, even though it appears to be worth a lot less, as the empty office blocks around the Paseo de la Castellano illustrate. It has all the hallmarks of state aid in disguise, but proof is still elusive.
Unfair distribution
The problems in Spanish football are also structural. The big guns Real Madrid and Barcelona profit a lot more than their smaller rivals from TV rights for example. In the 2009/2010 season, Spanish clubs raked in 600 million euros from the rights, more than half of which went to Barcelona and Real Madrid. The remainder was divided between the other 40 clubs in the first and second division.
Although the Bundesliga earns less from TV rights - 386 million during the 2010-2011 season – it is distributed more evenly, so that multiple champions Bayern Munich received 30 million euros from that pot, but division-two club St. Pauli still got a 13-million slice of the pie.
Stricter licensing rules
The near hopeless financial situation in Spanish clubs could have been prevented by introducing a German-style licensing system. The German Football League Association (DFL), which is responsible for the marketing and licensing of Bundesliga clubs, monitors clubs' finances much more rigorously, keeping debt relatively low. If German regulations were applied to Spanish or even English clubs, many of them would not be granted a professional license.
Economists like Juan Francisco Corona are calling for European football’s governing body UEFA to intervene. "Spanish authorities are not willing to impose sanctions on Spanish clubs. That's why UEFA needs to step in," he said.
And the powers-that-be at UEFA are listening. President Michel Platini has already developed a concept called 'Financial Fair Play,' which is set to come into effect next year. It could revolutionize European football.
Spilling over into Italy
A revolution seems almost necessary in some parts of Europe, as the problems in Spain are also a familiar sight in Italy. There, players are threatening strike action because of a planned relaxation of transfer regulations, which the players' union is fighting tooth and nail.
On Thursday, last-ditch talks between the Italian Football Association (FIGC) and the unions failed, and the FIGC has threatened to delay the start of the season this Friday, to pre-empt a strike.
And it's not just about paying players' wages. Clubs also owe the Spanish government sizeable amounts: Taxes and social security contributions worth 632 million euros have not yet been paid.
Author: Joscha Weber, Nicole Goebel (with AP, Reuters)
Editor: Rob Turner